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tv   Nightly Business Report  PBS  September 13, 2012 1:00am-1:30am PDT

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>> this is n.b.r. >> susie: good evening, i'm susie gharib. apple takes the wraps off a new razzle dazzle phone. is the excitement for the iphone 5 hype, or a gamechanger? >> tom: i'm tom hudson. a game changer in the defense industry, two of europe's biggest players look to join forces, just as the u.s. defense industry prepares to slim down. >> susie: the latest census numbers are in, and a record 46 million people remain below the poverty line. >> tom: that and more tonight on "n.b.r."! >> susie: thinner, faster, taller. we're talking about apple's hotly anticipated iphone 5. it was unveiled today in san francisco, and investors were impressed, juicing the shares up to $669 a share. but does the new device live up to the hype? erika miller takes a closer look at whether the new iphone will
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be fruitful for apple. >> reporter: this is the new device that could upset the apple cart in the smartphone industry. apple c.e.o. tim cook unveiled the iphone 5 in san francisco. and it has new features designed to fend off competition from rival android phones. >> it is an absolute jewel. it is the most beautiful product we have ever made bar none. >> reporter: now the nitty gritty: the phone is made entirely of glass and aluminum. so it's 18% thinner, and 20% lighter than the last version. it has a larger four inch screen, and a faster data connection. >> the apps on the phone constantly communicate with the network. so if the connection is slow, the phone will be slower. with these faster data connections, people will find that using their phone-- the phone itself will be more responsive. >> reporter: for customers who sign two-year service contracts, the phone will range from $199 to $399. so where does the iphone 5 fall short of the hype?
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>> you've heard of this ewallet functionality-- using your phone to pay at the register and a whole bunch of other things. i thought there would be that type of technology there. >> reporter: but that's not likely to stop legions of apple fans from lining up to buy the new iphone. pre-orders start friday, and it will be available in stores september 21. there's a lot at stake for apple with this launch. the iphone contributes roughly half of apple's revenue, and a bigger percentage of profits. erika miller, "n.b.r.," new york. >> tom: the launch of the iphone five may bring a boom in business for apple, but it also threatens to ding profit margins at apple's wireless carrier partners. a.t.&t., verizon and sprint will likely entice iphone customers with discounts on the new device, but those companies still will pay apple's full price.
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with the iphone 5 expected to be an me hit, it will mean an immediate hit to profit margins. at&t's wireless division had operating income marriage is of 15.2%. last quarter with no new iphone to subsidize, that margin had doubled to 30.3%. a record. margins rebound as all those customers use and pay for their service plans. >> it will be good for the carriers long term because it brings in new subscribers potentially to the network and it also allows the update of other subscriber who might have been paying lower pricing plans to upgrade to higher ones. >> reporter: in a change from previous models, the iphone 5 runs on the next generation l.t.e. wireless technology. it's much faster, and it could lead to customers gobbling up their data limits. >> i think there might be a little sticker shock with people they don't realize how much data they're consuming so they're more likely to go beyond the limit on their plans, and go to a carrier with an unlimited plan. >> reporter: moorman points to sprint's unlimited data strategy as one that may benefit from the
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new wireless technology used by the new iphone. >> susie: scott sutherland says apple's new phone stands apart from everyone else. he's equity analyst at wedbush securities. so, scott, is this apple iphone just a nice new techy device? or is it a game changer? >> you know, i think it's almost a game changer, it is a bigger upgrade than the 4s was. this is faster and bigger. i think those are two of the key selling points for any smart phone. >> susie: so people are saying this is the kind of phone that people will line up, they'll stab in line, a wrap around the apple stores to buy it. what kind of sales are you expecting? >> you know, we've initially put 6 million units into our model for the last 10 days of this quarter. i would not be surprised to see as much as 10 million some at the expense of older phones, but most of that is incrept al,
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and that will be about 40% of their sales if they do 10 million of their unit sales. >> susie: how does this compare to other iphone launches? >> like i said, i think the 4s is a nice interim upgrade. there was a few people disappointed it did not have 4 g in that last cycle, but it was pretty well-known they wouldn't have it. now they do have it i expect it to be a bigger upgrade cycle. i expect it to be a bigger driver for apple going forward tonight was. >> susie: what will this do to apple stock? the stock is about $11 away from its all-time high of $680. what do you think, what are you expecting for this stock? >> this stock, i mean, earnings have continued to ramp up, so it's still trading around 10 times net of cash when you look at four quarters. obviously iphone is the biggest driver and that is going to continue to drive up just like the last year, i think the stock will start
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another run, once we see people line up for this phone. but they also have other things in the pih ipad, apple tv, strong pipeline for the next few quarters and that in totality and the entire system of devices will drive the stock higher. >> susie: you mentioned the ipad. a lot of people were expecting a new mini ipad to be announced today, it didn't happen whamt are you expecting when it does happen, what kind of ipad and how important is that going to be for apple and for its stock? >> i think the majority of us including myself did not expect an ipad to be announced or what's called the mini ipad which was brought about in the trial when they had to open their secrets a little bit, in the samsung trial. sound like they are lining up a press conference for october. we do think they could introduce a mini ipad at this point in time. they did have a sub announcement this press conference with the ipod. >> susie: so between, if that fall announcement happens and
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we've got this iphone already announced, what is the target you have on the stock, is it a buy at 670? or just too late to get in? >> no, i mean, we still have it in our best idea list, and we think that within the next couple weeks once the sales numbers come out we'll start to see the stock make another run like it did on the iphone 4s. we have an 844 price target and we think they can make it. >> susie: do you own the stock? >> unfortunately i don't own any shares, and we do make markets, but we don't do any banking. >> susie: thanks so much, scott sutherland, equity snafts at wedbush securities. >> reporter: i'm diane eastabrook still ahead, how chicago's latino business community is viewing the upcoming presidential election. >> susie: on wall street today, stocks were stuck in neutral as investors wait to hear from
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federal reserve policymakers tomorrow. the central bank kicked off day one of its two day meeti in washington. meanwhile, in germany today, that country's highest court cleared the way for europe's bailout fund to move forward. the ruling approves the creation of the so-called "european stability mechanism," removing uncertainty about the euro- zone's plans to resolve its debt crisis. stocks in europe rallied on the news. here in the u.s., the dow and nasdaq rose about ten points, and the s&p added three points. >> tom: american defense contractors may have a huge new competitor soon, the parent company of airbus and bae systems are in late stage merger talks. it would great the worlds biggest aerospace and defense company. more on this with larry korb, a senior fellow at the center for american progress with us from our washington d.c. bureau. larry, how could this reshape the global defense contracting business, if this deal progresses? >> well, what it would mean
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that it will be a major competitor, it will be very similar to boeing when they bought mcdonald douglas. i think it will be good for the u.s. and for the world global market, because it will put in a new competitor who can do things, for example, like i think if the merger had occurred we might have gotten a lower price on the tanker that we're doing. >> tom: so this comes at a time when defense spending is under a lot of pressure when it comes to the fiscal cliff and boeing and lockheed martin and others have looked globally for their growth. what could it mean for those international markets for the domestic defense contractors? >> well, if they're going to have more competitors, last year the united states had like 87% of the global market, 60 some odd billion dollars. what you'll see is they will not have as high of a share. i think the u.s. company share will drop back closer to 50%. >> tom: does the market shrink
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as well? or does that market continue to grow even with more competitors? >> well, the market grew substantially this year, primarily because of the threat that many middle east countries perceive from iran so, that was the big uptick in the global market. but again i think that the competition will be in what we call the developing countries, europe is not increasing its defense budget, our budget is going to, it's already going down and it probably will go down even more, even if we don't get sequestration, you will see further reductions as we try to grap well the deficit. >> tom: what's your best guess on this, i know you're in the a company analyst, but do you think this deal passes regulatory muster internationally? >> i think it will, because we had the same questions back in the 90s when we had, for example, lockheed buying general dynamics and then boeing and mcdonald douglas merged. i don't see it as any
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different particularly of the boeing mcdonald douglas merger. >> tom: we'll watch with great interest. larry korb with us from the center for american progress. >> susie: new numbers out today on poverty in the u.s.; 15% of u.s. citizens were living in poverty in 2011, the census bureau said today. that's basically unchanged from the year ago period. the report surprised many analysts who had expected the poverty rate to rise. but as sylvia hall reports, it's little comfort for the country's poor. >> reporter: 46 million americans lived below the poverty line last year.
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and that number remains stuck near a record high. >> there have only been a few years since the mid-60's that the poverty rate has been that high. and its much higher than it was before the great recession. it's gone up by, about 2.5% points. >> reporter: the median household income dropped in 2011 for the second year in a row, down 1.5% from 2010. stacey smith sees the faces behind all those numbers. he leads a program in washington, d.c. that helps those in need, get ready for employment. the program used to cater mostly to women in poverty, but since the recession started, the demographics have changed. >> i've seen the dynamics change, we've had a sprinkling of a couple of gentlemen, and the age has changed as well, we've got like a younger population we've got people in the ages of 18 on up to 24, 25. >> reporter: smith says his clients face a wide range of challenges, from long-term unemployment, to a lack of skills necessary for jobs, to simpler things, like limited
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access to daycare. his job is to help them work through it all, as they pull themselves out of poverty and find jobs. >> the turnaround time seems extremely long, i mean quite honestly. >> reporter: the longer unemployment sits over 8%, the longer it will take the poverty rate to come down. and some analysts think the way we measure poverty doesn't capture the true extent of the problem. >> although standards of living have improved in the united states, over the last half century, we still have this same relatively low benchmark for who's poor. so to be poor in this decade, is something much worse than it was to be poor in say, 1960. >> reporter: some people say extended unemployment benefits also kept the poverty level from rising last year. those benefits run out this year, which means next year's report could look a lot different. sylvia hall, "n.b.r.," washington.
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>> tom: about 70% of hispanic voters favor president obama in the upcoming election according to the latest gallup poll. but experts say getting them to cast votes could be tricky. many hispanic businesses say they're disappointed by obama's handling of the economy, healthcare and immigration. diane eastabrook has more. >> reporter: alfonso silva's biscuits and cookies have been making mouths water in chicago's pilsen neighborhood for three decades. but in recent years he's seen a drop off in customers. >> sometimes it's okay, but sometimes it's very bad because of the economy. >> reporter: boarded up storefronts throughout pilsen reflect the toll the sour economy has taken on hispanic businesses in chicago and across the nation. unemployment is part of the problem. in august the jobless rate among hispanics was 10.2%. almost 2% points higher than the overall rate. >> because of the level of unemployment people are not
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spending as they were in previous years and that certainly is going to hurt a business that deals directly with consumers. >> reporter: deportation is another problem. the u.s. has deported roughly 400,000 illegal aliens over the past four year and experts say thousands of others have left on their own. that means fewer customers for some latino-owned businesses. and a smaller pool of workers for others. giron books-- a distributor of hispanic texts-- employs some undocumented workers. company president juan giron says he's disappointed president obama didn't push harder for the dream act which would have provided permanent residency for law-abiding immigrants. >> they are obviously concerned and we're concerned because they are a very important part of our labor force, very significant part of our growth and without them we would be significantly hurt. >> president obama captured about 70% of the latino vote in 2008 and while many latinos still favor him in the upcoming election the president faces
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some tougher challenges. >> reporter: maria de los angles torres heads the latino studies program at the university of illinois at chicago. she thinks the huge numbers of latinos who helped elect president obama in 2008 won't be there this fall. >> what you will see is people staying home, people withholding their donations which they are and the enthusiasm factor not there as it was the last time. >> reporter: mitt romney is hoping to turn some of that disaffection into votes. next week he'll address the u.s. hispanic chamber of commerce at its annual convention in los angeles. diane eastabrook, "n.b.r.," chicago. >> susie: new estimates are in,
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>> susie: new estimates are in, and it looks like this year's holiday selling season will be the strongest for retailers since the great recession took hold. shoppertrek sees overall sales rising 3.3%, it bases those numbers on visits to more than 50,000 stores. >> tom: the major stock indices inches higher as investors and traders wait for the federal reserve's announcement tomorrow if it will do anything more to help the economy. the session for the s&p 500 illustrates the back and forth, with prices dipping mid-morning, and late afternoon, before closing with a small gain. it continues hovering around its post-recession high. volume grew slightly. 661 million shares on the big board. 1.7 billion on the nasdaq. not a lot of volatility among the major stock sectors.
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with the iphone five debt, the telecom services sector was the biggest gainer, up 0.7%. consumer staples was in the biggest loser, down 0.7%. energy drink company monster beverage was the biggest loser in the s&p 500. the firm has come under greater scrutiny about the safety of its drinks. today, two democratic senators wrote a letter to the food and drug administration requesting more information on potential health risks. that pushed shares down almost 10%. volume more than doubled. the senators want the f.d.a. to "assert its regulatory authority over caffeine levels in energy drinks marketed as beverages." another beverage maker, pepsi saw shares slump 2.1%, taking shares to their lowest price late july. the president of pepsi, seen as a possible c.e.o. candidate, is leaving the company to run the privately held flying "j" truck stops. homebuilding stocks continue building on their recent gains, as analysts keep up the optimism. that optimism was around pulte group today. shares were up 6% to a new 52 week high after an independent investment bank increased its price target. pulte shares have rocketed higher by more than 260% in the past year as builders have seen sales pick up, and cancellations fall.
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teen retailer american eagle outfitter surprised investors with a special dividend, paying shareholders on top of the regular dividend they receive. it's a $1.50 per share pay-out, coming to shareholders of record on september 26. the company said its part of its capital allocation plan. the news helped push the stock up 3.3%. the special dividend will return about $300 million to american eagle shareholders instead of a stock buyback with shares at a four and a half year high. four of the five most active traded exchange traded products were higher, with fractional gains. the s&p 500 volatility exchange traded note was down 2.8%, moving in opposite direction of the index. and that's tonight's "market focus."
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>> tom: with china slowing and europe in recession tonight's street critique guess is going where the misery is. martin leclerc is with us in washington. marty, why follow the pain, and not follow the gains like we've seen in the u.s. markets? >> well, we're value investors, tom, and what we like to do is buy companies that are cheap, not ones that have already been bid up. >> tom: and you are finding some u.s. companies but with big international exposure, begining with none other than the big board, the nyx, what makes you like this trading exchange? >> first of all one of the big problems in the world is too much opaqueness with respect to financial companies.
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and exchangers bring everything out into the light. and the new york stock exchange, which everyone knows for the stock exchange is much big than that now, they own several exchanges in europe, but they also own a derivative exchanges, the london and other parts of europe. >> tom: so with that in mine whash do you expect out of the stock price here, if you're a value buyer at these prices? >> well, at the current level of roughly 26 call it, it's yielding about 4.5% and we're long-term investors. so we're happy to buy and it hold onto it as a long-term core holding. >> tom: okay. you're also not afraid of defense, even though the building behind through in the capitol looks to cut defense spending, saic is the mid cap defense stock here. trading in the middle of the range over the next 12 months. again international exposure in defense markets, is that the idea? >> no, the idea there is more
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the infrastructure play that we envision going forward, and really it's around the whole cyber security space. and saic is the leader in that business and we think it's going to be a good growth vehicle into the future, and at current levels again it's yielding 4.5% and trading at something like a 13% precash in yield. >> tom: the val new looking for the dividend plays here. when you talk about long-term holders, are you talking about months or years? >> years. >> tom: years. >> we always try to frame everything into what we think sort of the biggest show on earth will be investment wise over the next decade or so. and for us, it's the fact that something like a billion people are going to be entering the consuming classes, in areas outside the developed world. but that means outside the developed world hundreds of millions of people will be entering the middlelass. >> tom: have you positions in the stocks we mentioned? >> we absolutely do. and we believe in eating our
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own cooking. >> tom: marty leclerc, with barrack yard advisors. >> susie: tomorrow on "n.b.r." as we mentioned, the federal reserve issues its latest policy decision, and newest economic forecast, we'll have complete analysis and market reaction. >> susie: with the fiscal cliff looming, and the nation's debt rating hanging in the balance, tonight's commentator explains, how the debt debate trickles down to you. he's simon constable, columnist at the wall street journal. >> reporter: genius physicist albert einstein famously commented that insanity is defined as doing the same thing over again and expecting a different result. it's an idea that congress needs to wake up to. more precisely, it needs to stop playing chicken with its fiscal decisions. the last few years we've seen nothing but dysfunction. remember the debt ceiling debate last year, that was when our elected officials waited untilec the very last minute to come to a decision. that sort of behavior isn't doing us as a country any
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favors. quite frankly it's nuts. it isn't just me that thinks so. ratings agency moodys just scolded congress. the firm that determines the riskiness of a borrower said tuesday the us risks losing its coveted triple-a rating if congress doesn't shape up. specifically it pointed to the pending tax increases we face starting in january if the government doesn't act swiftly and prudently. why does what moodys says matter to you? if the u.s. loses its triple-a rating it will have to pay more to borrow. if it pays more then you will also, for everything from credit cards and car loans to mortgages. that's something you need to think about when you go to the polls in a little less than eight weeks. i'm simon constable. >> tom: finally tonight, mcdonald's has a gut check, literally. the fast food giant today said it will list calorie counts on all items. just look for them on the overhead and drive-thru menus at its 14,000 u.s. stores by
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monday. the move gets mcdonald's out ahead of federal labeling laws expected to be implemented next year. the company says it has calorie choices for all appetites, hamburger to a 790 calorie angus steak burger. >> tom: susie, a classic big mac runs 550 calories, or a couple of hours on the treadmill. >> susie: at least. why do think make you feel so guilty about it? once in a while i do indulge and have the big big mac. but i don't like the treadmill part. >> tom: just close your eyes and other when you go in, that's the way to do it. that is "nightly business report" for tonight. have a great evening. you too susie. >> susie: same to you tom. we'll see you at nbr. com and right back here tomorrow night.
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